Supermax made me sit up and take notice

When this guy made a stand, he earned my respect almost immediately. A business guy who dare to say these kind of things surely do not need to depend on our gomen. I suspect his business should be competitive internationally. If you are good, then you don't need to suck up to the government. 

I have not been taking a look at Supermax for while. So I went and had a quick browse on their 2011 Annual Report. A couple of highlights.

See. They are no 1 in US dental glove market.

This company grew their shareholders' total return by 7 folds.

EPF has been selling shares in this company since end of last year. When people said the company said Supermax kena hit because of what the chaiman said certainly is not true. Keep this company under your radar. Buy when it falls hard when somebody is trying to to punish them unjustly.

Post GE: What would you do if market plunges?

As at 25 April 2013, the daily trading participation statistics were quite telling. Retail investors 11%, local institutions 53% and the balance goes to foreign investors. The KLCI made fresh new high, 1,718 but I never felt the excitements. I suppose I wasn't alone. I have been thinking whether the market has been climbing wall of worries. Are the worries genuine or just silly irrational fears?

There have been many talks that if PR comes to power, the market will surely drop. The most popular explanation is uncertainty. Uncertainty of power transition or economics policy. The second theory is disappointment  Failure of BN to retain power will certainly create disappointment to certain group of investors or speculators.

Both theories can be correct but what is more important is this. If the market really plunges, will you scoop up with two hands? My take is political driven sell-off seldom last long. It is a matter of time, people will wake up. An event like that will create a trading opportunity.10 - 12%  corrections in oversold territory will be a good entry point, then sell into relief rally of another 8 - 10%. 

For those who practices a bit of  market timing, the answer can be a bit more complicated. The overall regional markets that have been hitting new highs but it has never corrected significantly despite of  many signs of weak global economy recovery. A sharp corrections in external markets may push the market down after triggered by assumed GE 13 political tsunami.

For those who believe in coupling theory will be even more complicated. The governments intervention around the world had turned every market participants into very disoriented mode. The non-stop liquidity pumping activities have been supporting the equities markets. It was not entirely correct however to say that all asset classes, especially risky one, benefited from the liquidity. BRICs indexes were still way off from their 2008 peaks despite of it accounts for 50% of global growth since 2001. Commodities prices tanked and yet to make any new highs. In other words, the recent gain so far have been quite narrow(US equities) or lagged such as Japanese market and to some extend of Malaysia equity market. This worries me a lot and at the same time stress me out seeing it keeps rally days after days.

So the answer ranges from very simple to a very complicated one. To make things simple, the true north is always guided by valuation. Post GE 13, one thing for sure -- I will deploy cash to buy stocks on big sale if PR wins.

But what if BN wins and the market rallies? I will surely not buy into that rally and I will explain why in the next posting.

GE 13 Fever and market

The parliament was finally dissolved this week. Our stock market has been in see-saw moods since beginning of the year is finally made up its mind. It is zipping up. Pointing out the obvious, the foreign funds have been pouring in money driving the herd to charge ahead. I am not sure they are leading the herd to a green pasture or over a cliff. I have not seen retail participation more than 20% but they finally showed up last Friday.

The FBM Small cap seems to dance out of consolidation range, though it is over-bought now.

Judging the momentum of the market, this moving train is hard to stop, leading up to polling date. Price actions will surely get people emotionally charge. Those choose to play are surely have their own reasoning. They don't expect people to agree with them. Understandably.

Judging from what I read, those choose to play in the market is betting BN to retain power. You and I know to forecast outcome is as good as flipping a coin. To forecast the stock market post-election is even more difficult. Let's be honest, if you can do so, you already made money for the last few months from the volatility.

I see the market is no longer cheap. Cheap stocks(especially small cap) that can attract institution funds, are no longer cheap after parabolic surge within 1 - 2 weeks. Cheap stocks (own by retailers) are still cheap but may remain cheap.

Foreign funds can come, they can also go. Local funds can join, they can also sell when things start to wobble. Only retailers who have been highly disciplined telling themselves to buy at the buy at the bottom of market look shaky. They are finally start thinking to buy and contra(T+3) may ended up as a long term investor - stuck with a large losing position for next 10 years.

Thinking of hit and run?

Be my guest but just remember this. "Bulls make money, bears make money, but sheep just got slaughtered."

Charts of the day

Beautiful charts. 

No words needed. 

Just stare.

EPF risk profile has changed

The investment returns for the last few years certainly had been tough for many fund managers. EPF has done well navigating the turbulent investment sea for the last few years. Fair is fair. Here are the dividend rates for the last few years:

2012 6.15%

2011 6.00%

2010 5.80%

2009 5.65%

2008 4.50%

How did they did it? First, note the asset under management. It has grown from slightly more than RM 300 billion to over half-a-trillion. While the assets under management has grown by more than 60%, I am glad to see they held MSG, loan and bond and properties relatively constant. Thus almost constant in dollar but shrinking % to total assets. That is a consolation at least our money did not gone into more and more wasteful mega projects. 

The obvious uptrend is equities exposure. As a percentage, it has grown from 20% to about 40%. Equity has grown from RM 87 billion to almost RM 204 billion, slightly more than double. Like I said, I would rather to see them invest in companies rather than putting more money into bond. EPF's equity position of RM 204 b over RM 1.2 trillion[total bursa market cap] is about 17%.  17% is high but not that alarming yet. Members need to be aware of this composition and any down year in equity market will have an impact on dividend payout but I hope 4.5% would be the minimum. 

The reason I point out this shift is to alert people who are making argument based on old facts to get updated   and argue their case ( personal finance planning, policy debate, etc) intelligently. 

Turtle portfolio certainly will buy something ......

It has been quite unusual that I have this strong urge to write. The recent developments in the markets have been very interesting. There have been a lot of talks by people like Jim Rogers, Marc Faber, Art Cashing and even investment research reports(BofA, UBS, etc) are getting uneasy with the current stock market indexes  DJI or S & P 500 registering  many all-time-highs.

Of many of materials available widely on the internet, I like this video very much that described the current condition. It was a great debate whether it's fundamental or money printing. Check this out.

http://video.cnbc.com/gallery/?video=3000147363

I agree with Jim. It is money printing. I came to realize that it is futile to resist the Fed and other central bankers. The US, ECB and the latest was Japanese.........   The money printing pledges will keep the credit universe to expand pretty much like what Bill Gross had written his superb review: Credit Supernova ( http://www.pimco.com/EN/Insights/Pages/Credit-Supernova.aspx ). Though it is more of metaphor rather than literal, the eerie feeling always make me feel uneasy.

We are kind of in the middle of a big paradox. If the Fed and central bankers will only back-off from money printing when they see stronger growth, lower unemployment, etc....... Q Eternity may be going to be around for a while, implying the bull run will continue to charge till it pops.

A well respected research house like Brinyi Associates says the bull run is entering in the final phase which is Exuberance. This phase can be very volatiles and certainly can soar violently. March Faber recalled that prior to 1987 great crash, DJI went up by 40% from January. But, he is not sure whether this can repeat in 2013.

It is very tempting to think that the central bankers can "manipulate" the markets but they may one day found out  that the markets can run out of oxygen and spark a sell-off. At that time, the markets will be greater than central bankers. 

One more chart for your perusal.

http://www.zerohedge.com/news/2013-02-12/sentiment-more-bullish-99-all-prior-readings

Whenever there is a reversal from extreme bull index devised by Bank of America, the average pull back is around 12% but I think it should get closer to 20% this time. Whether this scenario will materialize or not is not important to me. What is important to me is to avoid a dumb mistake like pulling out money from piggy bank and start buying now.

I will surely buying something because I see great values begin to emerge on many small caps(minimum 100 million market cap)  in our Bursa Malaysia. There is tremendous liquidity sitting on the sidelines as our local funds and retail investors started to sell a lot of stocks over last few months. This will provide some cushion post-GE.

I am getting excited as the time of buying is drawing near.

Opposition 13th GE Winning Formula: 35-80-50

First why I choose to use the word Opposition as oppose to Pakatan. I like to use Opposition as it reflects the spirit of under-dog or black horse. Saw this comment from Malaysiakini posted by MP Bukit Bendera this morning. Good luck brothers. Let's do it. 

(Malaysiakini) COMMENT Johor is the last bastion of the BN, but the coming general election may prove that the fortress may turn out to be merely a sand castle.

If Pakatan Rakyat gets the support of 35 percent Malay, 80 percent Chinese and 50 percent Indian voters in Johor, 20 parliamentary seats will fall like dominoes.

And, therefore, Pakatan may well gain the much-needed 112-seat threshold to form the next federal government, with just the seats from Peninsula Malaysia.

In the two rounds of seat re-delineation exercises in 1994 and 2003, many multiethnic mixed seats were created for BN to maximise its multiethnic appeal and to make the most out of the opposition's inability to win across ethnic boundaries.

The BN-controlled media made PAS to be seen to the non-Malays as an anathema to their interests, while DAP as a threat to the Malays. Before 2008, PAS supporters rarely voted for the DAP and vice-versa.

The 2008 general election saw PAS benefiting from outpouring Chinese and Indian support for the "anything but Umno" call while some urban Malays voted for DAP for the first time in their lives. Many multiethnic seats in the states north of Negeri Sembilan and on the west coast of the peninsula fell to the opposition.

How Pakatan can win Johor

Sabah and Johor are the two most crucial battlefields in the 2013 election. While Sabah attracts substantial attention, it could be hampered by seat negotiation and cooperation among the opposition groups. Johor is where the BN representatives may fall like dominoes.

Of Johor's 26 parliamentary seats, only eight have more than 60 percent Malay votes that will be harder to win with the current level of support for Pakatan. No seat in Johor has more than 60 percent Chinese voters.

On the one hand, without 25 percent Malay support, even if the non-Malay swing to Pakatan is huge, the entire momentum may just fizzle out with very few seats gained. Pakatan received only about 20 percent Malay support in Johor during the 2008 general election.

On the other hand, if 35 percent Malay voters support Pakatan in this election, anything could happen. While it is tough to get 35 percent Malay support, it is never impossible.

I am told that a recent opinion poll shows Malay support for Pakatan in Johor to have exceeded 30 percent, though the support varies among parties. The support for PAS is much higher than average while DAP's Malay support is lower than average.

Working together the key to victory

The poll also shows that support for Pakatan from the Chinese is around 70 percent, though it varies among the component parties, with DAP exceeding the average while PAS getting lower than average. The poll shows the support from Indians about be about 50 percent.

As the election approaches, I believe the gaps will narrow if PAS and DAP, with the help of PKR, are able to convince supporters to vote for each other in the context of the coalition.

From a purely mathematical simulations, this chart on the left indicates the possible scenarios in Johor. This is based on the assumption that Indian support for Pakatan is constant at 50 percent.

Of course these are just simulations on paper. But it shows that Barisan Nasional's castle may crumble if a perfect storm comes into shape. It is also a fresh tsunami alert from the people of Johor to the government who refuses to reform.

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LIEW CHIN TONG is the member of Parliament for Bukit Bendera.